Humana is in talks with private equity firms to buy Louisville-based home health care provider Kindred, according to The Wall Street Journal, which cited unnamed sources.
A deal could be announced as early as this week, a source told Reuters, though the Journal said that the deal could still fall apart.
Humana, a health insurance company and one of Louisville’s largest employers, has been the target of merger speculation for weeks. The company tried to merge this year with rival Aetna, but that deal was blocked on antitrust grounds.
Health care experts have told Insider that pressures toward consolidation in the industry remain strong: Insurance executives believe that their companies need to get bigger to have greater bargaining power to negotiate good deals with health care providers, such as hospital systems, which also have gotten bigger to counter the heft of the insurers.
Aetna now plans to merge with CVS, and a health insurance analyst said recently that Humana had taken steps that indicated it was preparing for a merger as well.
Humana sold its long-term care insurance business — a move that mirrored Aetna’s decision in October to sell its group life and disability insurance businesses — and cut 2,700 jobs to “trim the fat” in preparation for a bigger deal, Ana Gupte, an industry analyst at Leerink Partners, said, according to Modern Healthcare.
In late November, Humana took steps to pay its executives millions of dollars in a “change of control” event, fueling more merger speculation.
Kindred, too, is nearing the end of a process to change its business model: The company said this month that it had sold 80 skilled nursing facilities and five assisted living facilities for $658 million to a joint venture involving New York-based hedge fund BlueMountain Capital Management.
According to the WSJ, the complex deal would involve Humana and private equity firms Welsh, Carson, Anderson & Stowe and TPG taking over Kindred’s home and hospice divisions, while the private equity firms would control Kindred’s facility-focused businesses, which include long-term acute-care hospitals and rehabilitation centers.
Sources told the Journal that the deal would value Kindred at $9 per share, 40 cents higher than Friday’s closing price.
Humana and Kindred could not be immediately reached.